Maharashtra govt to give higher GST compensation to local bodies

CM Devendra Fadnavis. (Express photo by Janak Rathod)

Ahead of the 2019 Lok Sabha polls, the state government on Thursday modified rules giving itself the power to give higher compensation to local bodies for loss of revenue owing to the transition to the Goods and Services Tax (GST) regime.

When the GST regime had kicked in last July, the government had adopted a uniform rule to compensate urban bodies for loss of income suffered due to the subsuming of various local body taxes, including the entry tax, local body tax, octroi and various development cesses, among others.

Actual revenue collections of urban bodies in 2016-17 were considered to arrive at the base income. But on Thursday, the Fadnavis government made an exception for some municipalities. Arguing that it had been approached by some municipalities demanding an upward revision in their base income, the government has now amended rules, retaining the powers for such upward revision in cases where it deems fit.

Sources said the BJP-ruled Nagpur municipality, where the chief minister himself hails from, had earlier approached the urban development (UD) department citing reasons on why its revenue collections had dipped abnormally in 2016-17.

According to the modification approved by the Cabinet, the government, upon receiving such representations, will now have the power to consider an upward revision of the base income, which would eventually result in higher GST compensation grants for the municipality.

Incidentally, the law department, also led by the chief minister, has raised strong objections to the move. While the law department’s dissent note was discussed on Thursday, the Cabinet went ahead with the move.